In response to the recent Supreme Court ruling that blocked the Biden administration’s student loan forgiveness proposal, the administration has devised an alternative method to proceed with the forgiveness program, effectively creating a loophole.

As per the latest announcement by the administration, a total of $39 billion in student debt will be forgiven for 804,000 borrowers.

This new program has been made possible through a regulatory rulemaking process initiated by the Department of Education. According to CNBC, the department has made adjustments to the income-driven repayment plans of the student loan program.

Under these repayment plans, the government cancels any remaining debt for borrowers after they have made payments for either 20 or 25 years, depending on the time of borrowing and the type of loan and repayment plan.

The Biden administration highlights that previous payments that should have contributed towards reducing the borrowers’ debt were not properly accounted for. Miguel Cardona, the US Secretary of Education, expressed concern over the flawed system that failed to accurately track borrowers’ progress towards debt forgiveness.

Eligible borrowers will receive notifications from the Education Department in the coming days.

The adjustments made to the repayment plans include considering payments made by borrowers who had paused their payments due to deferments, forbearances, or those who made partial or late payments.

The Department of Education acknowledges that this action rectifies past errors and administrative failures that resulted in the miscounting of qualifying payments made by borrowers. This includes individuals with Direct Loans or Federal Family Education Loans held by the department.

It is important to note that this development occurs ahead of the resumption of student loan payments in October, following a temporary pause during the pandemic.

Additionally, the Department of Education is progressing with the Saving on a Valuable Education (SAVE) plan, which we have previously highlighted.

Under this plan, undergraduate loan borrowers will only be required to pay 5 percent of their discretionary income instead of the current 10 percent. The administration estimates that this reduction will save borrowers around $1,000 annually. Furthermore, borrowers with balances of $12,000 or less will be eligible for student loan forgiveness after ten years of payments, instead of the original 20 years.